Interest Rate Jitters Sink The Heavyweights Of Tech

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A month-long bull market rally bottomed out as investors grappled with "longer-term" interest rates around the world. Global sales of stocks and bonds accelerated on Thursday. And weary market watchers will be looking for further clues about the Fed's outlook at next week's Jackson Hole meeting of central bankers and policymakers.

Technology stocks were particularly hard hit. The rising FANG+ index of the largest technology stocks by market capitalization, including Apple, Nvidia, Tesla and Meta, fell into correction territory on Thursday. The Nasdaq heavyweight is down about 11% since July 18.

High-growth tech stocks are sensitive to rising interest rates and bond yields. Investors rallied at the start of the year on confidence that the Fed was moving toward a more accommodative rate policy, which could lead to a recovery in technology spending. (Investor appetite for stocks that could benefit from the AI ​​boom also fueled the tech rally.)

Just a month ago, Wall Street was praising the "Magnificent Seven" for being responsible for this year's S&P 500 gains. According to MarketWatch, four of the seven (Apple, Nvidia, Meta and Microsoft) declined more. more than 10% from the July peak. Tesla, the worst performer of the group, fell more than 25% during the period, entering bearish territory.

Rising bond yields worry investors. Alarms sounded on both sides of the Atlantic on Thursday as investors sold government bonds en masse and yields hit multi-year highs. In the early days of the global financial crisis, 10-year Treasuries rose to their highest level since 2008.

The sentiment sent stocks and cryptocurrencies lower. Major cryptocurrencies Bitcoin and Ethereum fell overnight, with Bitcoin hitting a two-month low below $26,500. The Wall Street Journal reports that Elon Musk's rocket company SpaceX has dragged down the value of Bitcoin shares over the past two years, and sentiment in the highly volatile asset class has not improved despite selling off some of its shares.

China's problems are also affecting global markets. Hong Kong's Hang Seng index fell on Friday as investors returned to Chinese shares amid a slowing economy and turmoil in the real estate market. Also on Friday, analysts at Nomura recently lowered their forecasts for China's growth. Adding to the concern, the renminbi hit a 16-year low against the dollar on Friday, prompting urgent moves to support the currency. That did little to calm investor nerves.

What's going on here?

The Chinese real estate company Evergrande filed for bankruptcy in the United States. The company defaulted on bonds due in 2021, sparking a crisis in a sector that is a key driver of China's growth and is seeking a restructuring deal with creditors. Another developer, Country Garden, defaulted on its international debt this month due to a sharp economic slowdown in China.

Instacart plans to IPO early next month. The nation's largest online grocery retailer is seeking a traditional listing after considering a direct listing on the Nasdaq, according to Bloomberg. SoftBank's chip design unit has hired 28 banks in what could be the biggest IPO of the year, Bloomberg reports.

Mortgage interest rates have reached a 21-year high. Lending giant Freddie Mac said Thursday that the average rate on a 30-year mortgage, the most common type of mortgage in America, topped 7% this week; A year ago it was 5.19%. Rising mortgage rates and housing shortages are forcing a growing number of Americans out of the real estate market.

The Southwest is preparing for Hurricane Hillary. The Category 4 storm is expected to make landfall in Baja California on Saturday, then make landfall along the Mexican border into California, where it will weaken to a tropical storm. A flash flood warning has been issued for Los Angeles and Ventura counties.

All metal war

A cornerstone of President Biden's anti-China efforts is securing access to goods critical to supply chain security. A war over US steel bids could test those ambitions in a sector dominated by Chinese rivals.

But the geopolitical battle around the world could have long-term consequences for the economy and the Biden administration's energy transition plans.

Cleveland-Cliffs opens bid for US Steel with $10 billion offer. The winning bid will help consolidate the US industry, which has been reduced to four major companies: Cleveland-Cliffs, US Steel, Nucor and Steel Dynamics. China is the world's largest producer, accounting for almost half of global production. The Fourth United States.

US Steel publicly rejected the initial offer. The company called Cleveland-Cliffs' terms "unreasonable" and announced a formal review process. The United Steelworkers supported Cleveland-Cliff's proposal, but manufacturers feared further consolidation would give steelmakers additional leverage to raise prices and pressure customers.

Another big metal battle is coming in Indonesia. The country has the world's largest reserves of nickel, a mineral used in electric car batteries and a key element of the green economy. The Biden administration has offered billions of dollars in subsidies to encourage the production of electric vehicles, and the energy transition is a key aspect of the inflation-reduction act.

But Indonesia's nickel industry relies on Chinese companies for investment and technology. This complicates Jakarta's efforts to build relationships with multinational companies seeking to access the country's reserves and US tax credits through IRAs. The Indonesian government is pushing Tesla to build a factory, but the company has set up its headquarters in Southeast Asia. Malaysia instead.

This could lead to further opening up of China. Indonesian officials are considering other options, including increasing efforts to accommodate BYD, China's largest electric car maker. "We mainly have our eyes on the United States," Luhut Binsar Panjaitan, one of Indonesia's most powerful ministers, told the Times' Peter Goodman. "But if the Americans say we don't want to accept that, then we'll look elsewhere to go."

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38 million dollars

— According to Bloomberg, Spotify could boost its profits by pulling listeners away from white noise podcasts. The company's algorithm prompts users to find "conversational" content that contains broadcasts ranging from whale calls to birdsong. However, these users tend to stick to the free, ad-supported version of the platform rather than opting for Spotify's more affordable subscription plans. The company considered directing viewers to more profitable shows, but did not implement the plan.

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What does the future hold for Hawaiian Electric?

The Maui wildfires have killed 111 people and are drawing attention to the nation's worst natural disaster in decades. Maui's emergency management chief resigned last night after being questioned about a decision not to use outdoor warning signals. Hawaii Electric, the state's largest utility, is also under heavy scrutiny

It could be months before officials assess the company's role, if any, in the fire. But markets fear the worst. Shares of Hawaii Electric have fallen more than 65 percent since Aug. 7, the day before the fires. On Friday, Moody's became the latest credit rating agency to downgrade Hawaiian Electric as a potential risk taker.

The big question is whether the company will be forced to follow the same path as California-based Pacific Gas & Electric, which filed for bankruptcy in 2019 due to wildfires.

One thing to consider is whether your insurance covers it The extent of Hawaiian Electric's enormous restructuring costs and potential liabilities. At least four lawsuits have been filed alleging negligence in the operation and maintenance of the facilities.

Evidence is presented. Video and photos from Maui show power lines sparking fires. In addition, data from Whisker Labs, which monitors power grids for fire hazards, shows that there are faults in power lines at the site of the fire.

There is a significant difference between Hawaiian Electric and PG&E. California has tort laws that make it easier to hold utilities like PG&E accountable. Hawaii has no such rule, meaning the bar for plaintiffs to blame management is higher.

Will Hawaii allow companies to file for bankruptcy? As bad as Hawaii Electric's finances are, Hawaii may not want to let its largest electric company go bankrupt. This may delay the reconstruction of the island.

The state has seen major bankruptcies in the past, including Hawaiian Airlines in 2008 and Liberty House, its largest retailer, in 1998. Trying to save the company from bankruptcy may be seen as a more politically sensitive option than leaving its future to a judge.

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